COPENHAGEN, Feb 1 Denmark is facing its "Nokia
moment"; drugmaker Novo Nordisk has ballooned into a
$100 billion giant, dominating its home stock market just as the
Finnish firm did at the height of the 1990s tech boom.

While the mobile phone maker's market value eventually
slumped, there is a reason for thinking that Novo can remain a
growth engine for the Danish economy for years to come - even
though it has created a lopsided bourse that a new stock index
aims to rectify from next week.

Novo is the biggest producer of insulin and as the world
suffers from an epidemic of type 2 diabetes, demand for its
products has propelled double-digit sales growth for a decade.
That epidemic, linked to over-eating and lack of exercise, is
expected to last for decades.

The drugmaker has overtaken Norway's Statoil as the
Nordic region's biggest company by market capitalisation, after
a near 40 percent surge in its share price last year.

Denmark is increasingly reliant on the biomedical sector as
its shipping and financial industries stall, and the winning
streak in medicine has eased the pain for a $333 billion economy
that has been on the brink of recession for several quarters.

"Norway has its oil, Sweden its industry, the Finns have
basic materials and we have pharma," said Morten Kongshaug, a
strategist at Danske Bank.

Denmark's biomedical industry is thriving in the wake of
Novo's success, although the soaring share price is a headache
for the Copenhagen bourse which wants a balanced market.

With Novo making up nearly half the top 20 Copenhagen
benchmark index - eclipsing shipping giant A.P.
Moller-Maersk's 11 percent - the stock exchange
will change the benchmark from next week to a new index that
caps Novo's weighting at 20 percent.

Similar changes were made in 1995 when Nokia's
weighting reached 47 percent of the Helsinki index, and again in
2001, as well as for Sweden's Ericsson in 2000.

PIGS AND BEER

Novo's success in insulin can be traced back to two things
which have long been abundant in Denmark: beer and pigs.

The group was formed in 1989 by the merger of Novo and
Nordisk which had been separate companies since the 1920s.

Denmark's brewing industry, made famous by Carlsberg
, helped Novo's technical expertise in production and
fermentation, while an ample supply of pig pancreases made the
country an ideal place to study insulin.

In the 1980s the world's first insulin preparation which is
structurally identical to human insulin was launched in the
United States. It is extracted from the pancreas of pigs and
converted to human insulin chemically for treating diabetes.

Denmark has long been a major bacon producer, meaning there
was no shortage of pigs - today there are almost 20 million, far
outnumbering the human population of 5.6 million.

The biomedical sector now accounts for the biggest chunk of
Danish exports - 10 percent - and numbers employed in the highly
skilled industry almost match those in shipping, making it one
of the country's top employers, counting related industries.

It is often said that anyone in Denmark's biomedical sector
has either worked at Novo or has some kind of link to the firm,
and the knock-on effect has helped give the country the
third-largest new drug pipeline in Europe, according to Ernst &
Young.

"Novo Nordisk is actually feeding the life science engine in
Denmark," said Anders Hinsby, chief executive of Orphazyme,
which is hunting for new drugs for rare genetic diseases.

Hinsby works in Copenhagen's Bio Science Park, a cluster of
biotech firms that will double in size this year, helped by
start-up funds and tax incentives to attract foreign scientists.

Today Novo stands out in a global drugs industry that is
struggling with falling sales, thanks to its focus on diabetes.

Its shares trade on 22 times expected earnings, nearly
double the multiple of other European drugmakers, and its market
value puts it among the top eight drugmakers worldwide.

The company's performance has raised some eyebrows. "It is a
small country, a small market, with a very successful company,"
Kongshaug said. "That's a recipe for something that could
potentially go wrong and Nokia went wrong."

Nokia's market value has slumped from $300 billion to just
$15 billion today as many buyers look elsewhere for smartphones,
but Novo seems to be keeping its grip on the insulin market.

Investors are banking on U.S. approval for Novo's new
insulin Tresiba and a rejection, while unlikely, would be a
serious blow.

Still, Kongshaug thinks a major setback is unlikely and
Novo faces no immediate threats to its main products. Goldman
Sachs added the stock this week to its "Conviction Buy List".

VERY DANISH

Sorensen predicted last year that Novo could become one of
the world's largest drugmakers by market value, although it
still has a way to go to catch Pfizer on $200 billion.

Nonetheless, Novo plans to stick close to its Danish roots,
rather than having corporate centres around the world.

"We see ourselves more like BMW or Apple, in that we have a
strong core location in a centralised governance centre, in our
case Copenhagen," he told Reuters. "We are also skewed in
leadership to one nationality, in the same way that BMW is very
German and Apple is quite American."

While rivals such as Novartis, Sanofi
and AstraZeneca have brought in outsiders as chief
executives, Sorensen and all four members of his top executive
team are Danish.

As the Novo Foundation controls about 73 percent of votes -
despite owning only 26 percent of capital - Novo can get on with
its business without worrying about takeover threats.

Expanding the business will get more difficult as annual
sales approach $15 billion, but the need for diabetes care shows
no sign of waning. The International Diabetes Federation says
371 million people have the disease worldwide and predicts the
figure will reach 552 million by 2030.

"It is getting more difficult, I have to say, (but) the
fundamentals are there on the demand side," Sorensen said.
(Additional reporting by Ben Hirschler in London and Ole
Mikkelsen in Copenhagen; editing by David Stamp)

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